1980 (2) TMI 239 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry No. 97 of the Second Schedule of the Karnataka Sales Tax Act, 1957 regarding the classification of water-colour and poster colour for tax purposes.

Detailed Analysis:

Issue 1: Classification of Water-colour and Poster Colour under Entry No. 97
The dispute in this case revolved around whether water-colour and poster colour fall under entry No. 97 of the Second Schedule of the Act, which includes "paints, colours, dyes, and varnish." The assessing authority proposed to levy tax at 6 per cent based on this entry, considering the items sold by the assessee. However, the assessee contended that these items should be taxed at 3 per cent as they are stationery goods, not falling under the said entry. The appellate authority initially sided with the assessee, but the Commissioner disagreed, holding that the items did fall within entry 97. The assessee then appealed this decision.

Issue 2: Interpretation of Entry No. 97
The assessee argued that the common parlance understanding of the terms "paints, colours, dyes, and varnish" in entry 97 should not include water-colour, poster colour, and oil-colour, which are used by students and artists, not for surface painting like traditional paints. The High Court referenced a Supreme Court case to support the principle that dictionary definitions are not always conclusive in interpreting such entries. The court agreed with the Deputy Commissioner's view that these items are drawing materials used by students and artists, not typical paints and colours used for surface painting.

Issue 3: Legislative Amendment and Interpretation
The subsequent amendment to entry No. 97, which replaced "varnish" with a list of items like varnishes, pigments, and paint-brushes, further supported the court's interpretation. The court held that this legislative amendment reinforced the understanding that goods under entry 97 are those typically dealt with by hardware or paints merchants for surface painting, not items like water-colour and poster colour used by students and artists. This legislative exposition guided the court in interpreting the provisions as they stood before the amendment.

In conclusion, the High Court allowed the appeal, setting aside the Commissioner's order and restoring the decision of the Deputy Commissioner, emphasizing that water-colour and poster colour do not fall under entry No. 97 of the Second Schedule for taxation purposes.